Evercore ISI has sounded a cautionary note, warning that the fervent rally in hotel stocks may have reached its peak. The renowned firm adjusted its rating on both Hilton Worldwide Holdings (NYSE:HLT) and Hyatt Hotels Corporation (NYSE:H) from Outperform to In-line ratings, citing the considerable surge in share prices in 2023.

Analyst Duane Pfenningwerth explained that the revised outlook for the hotel sector reflects their position that the quarter’s prospects are rather limited, notwithstanding the firm’s general anticipation of an upside to existing guidance. He observed that even if the reports and guidance are robust, there seems to be little room for significant share price returns.

Regarding the impressive earnings reports coming from the airline sector, Evercore cautioned that drawing direct parallels can be challenging due to the significant disparities in supply growth rates and the varying macro risk scenarios factored into valuations.

“We acknowledge hotels enter ’24 with higher visibility vs. this time last year given strong group bookings pace. The group story is a healthy story (but no longer a surprising one),” stated Duane Pfenningwerth.

Both Hilton (HLT) and Hyatt Hotels (H) are scheduled to release their earnings on February 7 and February 15, respectively.

Hilton (HLT) saw a decline of 1.10% in Monday afternoon trading, while Hyatt (H) experienced a dip of 2.05%. Over the last 52 weeks, the lodging sector has seen Marriott International (MAT) lead with a 38% rally, followed by InterContinental Hotels Group PLC (IHG) with +33%, Hilton (HLT) with +31%, and Hyatt (H) with +16%.